You agree to buy some sarongs for USD 10 in the art market somewhere in Bali and think wow this is a good price. The seller wraps your lovely sarongs in a plastic bag and give it to you while you hand her the USD 10 note. The seller look at your note and say, "Sorry, I can not take this money, do you have other money or do you have rupiah?" And all you can say is,"What??"
If this happen, there are some possible reason the seller can not accept your money. The most common reason is because your bank note is old. It has torn a little at one edge or just "dilapidated" money. The local bank in where we change the US bank note, only accept new bank note. Meaning it has not folded yet, just like a shirt when you finish ironing it. (I am struggling to find the right terms because English is not my first language, I hope this is clear).
Another reason is, although the bank note looks new, but it is an older edition. The bank note is which is published earlier, though it is still widely used, can not be accepted here. Locally the sellers and the money exchangers in Bali only accept the bank note with "kepala besar" or big head but not "kepala kecil" or small head. This is just local term, never mind about it. But what they intend to say is that the newer edition of US Dollar has a big picture (potrait) of the US former president (George Washington or Jackson). At least it is bigger picture than the older edition.
So, those are the only reasons. There is no big mystery. Just take your newer bank notes to Bali, and they are should be the newer edition (series 2004, 2005, or 2006) then you will have no problem shopping in Bali.
NB. For Australian dollar, there is no such issue. But the bank here does not accept coins. And neither does the money exchangers. So, bank note is easier to use compared to coins.